r2i forum

nand;32232If you give them more than 12K USD each then it attracts gift tax. Give them 12K. I do not know if there are other ways to avoid this.[/quote]

Gift tax can still be avoided on a gift from a US resident donor to a donee (recipient) in excess of $12K in a year, by filing a gift tax return and making use of the lifetime unified/combined credit limit for gift tax and estate tax. The amount of credit available for future use will be reduced when this election is made.

http://www.irs.gov/publications/p950/ar02.html#d0e123

Vijay Kumar;32609One person can gift 12k per year without having to inform the IRS. So you can gift 12k to your father and 12k to your mother. Same for your inlaws if you have them. Also, your wife can do the same amount as well. As a result you could gift 96k per year if you are married and each choose to do it. In a few years that could be a lot of money.[/quote]

Agree.

RRK;3268412K limit is only applicable for gifts to US Residents ( include citizens, GC etc). Not for Indian citizens who are resident of India.[/quote]

The $12K annual exclusion limit is for each donor-donee combination, when donor is US resident. It does not matter whether donee (recipient) is US resident or not - the annual exclusion limit still applies as long as donor is US resident even where donee is non resident alien.

Say A is US resident
Say B is US resident
Say C is non resident alien

Assume A is not married to B or C.

Case 1

If A (US resident) gifts more than $12K in one year to B (or alternatively to C) then A has to file gift tax return and either

(i) pay gift tax on the amount of gift that exceeds $12K

or

(ii) make use of the lifetime unified/combined credit limit of for gift tax and estate tax and decrease the credit available for future use.

Here B and C have no US tax reporting or payment obligations.

Case 2

If A (US resident) receives a gift from C (non resident alien), then the $12K annual limit does not apply. In this case, if the gift from C exceeds $100K in a year, then Form 3520 has to be filed by A as a mere reporting requirement, though A (as donee) is not liable to any gift tax.

http://www.irs.gov/pub/irs-pdf/f3520.pdf

http://www.irs.gov/instructions/i3520/ch01.html#d0e60

Here C has no US tax reporting or payment obligations.

RRK;32781Investing in Parents name may be considered under Benami Act.

Read more: I dont want to duplicate the posting. click this link #10[/quote]

When the gift from a son/daughter to parent is clean, and investment is made by parent, then Benami Act provisions are not attracted, even if parent nominates the son/daughter as beneficiary / inheritor of the investment in the event of parent's demise.

I had similar doubts some time ago and checked with Rajesh about them. Will try to post link to the relevant MSN forum thread.

Added Later

The relevant MSN thread has been copied to this new forum:

Investing Safely in India Resident Parents' Names

Extract (from Rajesh's Post #7 in the thread above)

4. The Benami Transactions ( Prohibition ) Act, 1988 defines " Benami Transactions " as a transaction wherein a property is transferred to one person for the purchase price being paid by another person.
.02 Apparently, the said transaction is technically also not covered by Benami Transaction Act.
.03 Such a transaction will also not contravene the provision of Foreign Exchange Management Act or any other Statutory rules as the gift is genuine and bonafide ; the relationship is also very close ; the donor being the son has sufficient capability to gift such amount and the purpose of gift is natural love and affection.

5. The same analogy applies to purchase of agricultural land. Accordingly, an NRI son can gift say Rs.20 lacs to his resident mother, who may purchase agricultural land from the said amount of gift and subsequently provides for such agricultural land to be inherited by her son by way of a Will.

6. To the best of my knowledge, such genuine transactions are not contravening provisions of any of the Statutes.